Let’s be honest, weddings are costly affairs, averaging about $26,645 according to annual reports. And with the exception of a lucky few, most of us don’t have that kind of cash lying around to invest in our dream wedding without a second thought. While it’s perfectly possible to throw a gorgeous wedding on any budget, there may come a time when you need some extra help. So what about taking out a personal loan?
Saving and preparing for even the smallest expense is a crucial part of the bridal planning process, and while most financial advisers would, well, advise you not to rely too heavily on personal loans or credit to pay for your big day, it’s worth looking into what options are out there and how they can work in your favor.
1. What are wedding loans?
Sadly, “wedding loan” isn’t an official term, and certainly not one recognized by a financial institution. A wedding loan is essentially a personal loan, which most financial advisers are divided on. Some will say it’s a sensible option, while others frown upon it. The icky truth about personal loans is that we take them out when we don’t have enough money for something, plain and simple. And unlike a business loan, in which a return is likely to be what helps you repay it, there’s no guaranteed source of repayment with a personal loan, which means a higher risk of defaulting and accruing interest. However, personal or “wedding” loans are certainly not unheard of, and many have successfully applied them to covering wedding expenses.
2. How do you get a wedding loan?
Much like applying for any loan, it takes a decent credit score and diligent organization to begin the process. Any score at or above 700 is considered a good credit score by most financial lending services, and while it’s still possible to get a loan if you’re sitting at a lower score, the interest rate will be much higher. If you’re not sure of your credit score there are dozens of websites with free credit reporting services, along with updated alerts whenever there’s been a change in your score.
Once you’ve figured out your score and whether a loan is possible, make sure you get all your necessary documents in order. Proof of income (usually by way of pay stubs or transfer notices), bank statements, and any other loan repayment paperwork will influence your potential lender’s decision, and allow them to quickly and efficiently check your personal finance history.
Generally it’s best to try to apply for a loan in person at a financial institution, rather than online. Online lending services are more of a hassle, requiring infinitely more documentation and with the likelihood of tacking on hidden fees once the deal goes down.
3. Benefits of a wedding loan
Shakespeare may have written “neither a borrower nor lender be,” but sometimes life requires a little bit of both. Weddings are time honored and cherished celebrations that stay with you long after the cake is cut and guests go home, so a loan may seem like a small price to pay for the experience of a lifetime. Fortunately there are many loans available to fit all budgets and repayment needs, so most reputable lenders will work with you to ensure you make your monthly payments on time and with little detriment to your own personal well-being. If paid off in a timely manner, a wedding loan may in fact boost your credit score to ensure future borrowing opportunities.
4. The downfalls of getting a wedding loan
As mentioned prior, loans are taken out when money is short, which means the question of repayment is always a serious factor to consider. If you have less than stellar credit, there’s a good chance you’ll be considered a “high risk” borrower and slapped with above average interest rates.
You may be taking out a loan for a one-day occasion, but you could be paying it off for years to come. As one financial rep points out, you could take out a $32,000 loan with an annual rate of 7.5%, but that means you’ll be paying it off for the next 48 months, with a minimal payment of just under $700–that’s close to a month’s rent!
The danger of falling into default with a loan is always present, and it’s up to you to decide if the risk is worth it. Perhaps you and your partner want to start a business together, buy a new car or house, or even plan a family, and you may have to factor in how a wedding loan repayment will affect those future pursuits.
When it comes to deciding whether or not a wedding loan is right for you, it’s best to weigh all your options before biting the bridal bullet. Would extending the engagement for one more year help you and your partner save the necessary funds and forgo the need of a loan altogether? Are there creative shortcuts you can apply to costlier aspects of your dream day to save some precious moolah? By asking yourself a few simple questions and making a few sensible allowances, a personal loan may not be necessary after all.